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Crest Nicholson boosts growth targets

By Abigail Townsend

Date: Wednesday 20 Oct 2021

Crest Nicholson boosts growth targets

(Sharecast News) - Crest Nicholson has strengthened its medium and long-term growth targets, including expanding into new geographies, the house builder announced on Wednesday.
Updating investors at its Capital Markets Day, Crest Nicholson said it was targeting "in excess of" 3,000 home completions by 2024, and over 4,200 by 2026.

Targeted operating profit margins for both the medium and long-term are 18% to 20%, while the goal for return on capital employed is between 22% and 25%.

Surrey-based Crest Nicholson, which has traditionally focused on the south east, had stumbled before the pandemic, after Brexit concerns weighed on the housing market. However, chief executive Peter Truscott, who joined in 2019, has since sought to turn the company around, including introducing a new house range and cutting costs.

Crest Nicholson said: "Given the significant and rapid progress made in financial and operational performance, and building on the foundations of a strong balance sheet, the group is now outlining an ambitious growth strategy which will see it expand into new geographies."

It did not detail which regions, however.

Truscott said: "Our turnaround is now complete. We have developed an efficient operating platform and assembled a highly capable leadership team. The rapid progress we have made, supported by our strong balance sheet and favourable market context, gives us confidence to set out today's ambitious growth plans.

"The leadership team has a clear focus on delivering strong earnings accretion and creating substantial value for shareholders over the medium term."

Broker Peel Hunt said: "Longer term, opening an additional three regions should allow the business to deliver over 4,200 units, again with an 18-20% margin and 22-25% ROCE. The dividend policy will be a cover ratio of 2.5x across both time periods, in line with our current estimates.

"Depending on the margin assumption, this implies operating profit of around £180m to £195m, ahead of both our estimate and consensus."

As at 1015 BST, shares in the FTSE 250 firm where ahead 2% at 379.6p.

In the summer, Crest Nicholson said it expected full-year 2021 pre-tax profits to be at least £100m, up on an earlier forecast of £95m. It also expected demand to remain "robust", despite the stamp duty holiday coming to an end.

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